Anheuser-Busch's $10 Billion Deal Spurs Hope for High-Grade Debt

Corporate bond investors are crossing their fingers in hopes the second largest deal of the year will help lift the high-grade credit market after the biggest sale earlier this month failed to stem widening spreads.

So far it looks good. Anheuser-Busch InBev SA/NV’s bonds are rallying - with spreads three to seven basis points tighter as of around 10 a.m. -- after it sold $10 billion of high-grade debt on Tuesday. But the big question is whether the strong demand for the beer maker’s issuance will help bolster a sagging investment-grade market, which CVS Health Corp.’s $40 billion offer on March 6 failed to do.

Tale of Two Jumbos

CVS and Anheuser-Busch weigh heavy on the U.S. credit market

Data compiled by Bloomberg

Largest U.S. corporate deals year to date

The similarities between the two sales are striking. Both priced on a Tuesday, saw healthy demand and met markets quieted by snowstorms. Anheuser-Busch also has to contend with the Federal Reserve meeting.

In CVS’s case, its bonds rallied while the rest of the market faltered. The Bloomberg Barclays IG OAS index rose five basis points in the week following the trade, adding to the five basis point increase over a similar period leading up to it.

Bank of America analysts led by Hans Mikkelsen think the opposite could happen this time around. They expect spreads in the credit market will narrow partly due to an end of the heavy supply, according to a note Tuesday.